Venture firms contribute more than just capital

Venture capital firms traditionally have been about raising money and investing it in promising companies.

Increasingly, though, venture firms are providing their portfolio companies not just money but time-saving services that allow those new businesses to focus on getting to market fast, industry experts said. The VC firms are even starting, or buying, separate firms or units to complement their financial investments in young companies.

"In the last 12 months, we're seeing more and more venture capital firms trying to support their portfolio companies with a variety of services," said Dianne Hyde Russell, senior vice president and manager at Los Angeles-based Imperial Bank's Boston office, which caters to the startups and early-stage firms invested in by venture capitalists.

In recent months, a number of Boston-area venture firms--including Atlas Venture Inc., Bessemer Venture Partners and Charles River Ventures--have begun helping their clients find office space, search for executives, secure legal help, as well as introducing them to bankers, landing marketing firms and leasing equipment--all the important details in building a company, but ones that could distract a fledgling firm from getting into the marketplace.

"They're trying to do 10 years of growing in 10 months," Russell said.

Charles River Ventures in Waltham has taken an early lead among venture firms looking to be all things to its portfolio companies, industry experts said.

This spring, Charles River officially launched CRVelocity, an in-house unit with the goal of taking care of the little things for companies in the firm's portfolio.

Ted Dintersmith, a Charles River principal, said CRVelocity continues Charles River's practice of supporting the companies where it invests.

"It reinforces what we do as a venture firm," Dintersmith said.

Charles River began experimenting with the concept 18 months ago, helping portfolio companies with leasing problems. Today, nearly all of Charles River's approximately 60 portfolio companies use CRVelocity, which employees 15 people and has a $10 million budget, Dintersmith said.

Dintersmith said that startups and early-stage companies need help as they grow, or they become distracted meeting the growing demands created by growth. Those demands include the need for larger offices, new executives, more equipment and advertising. All take time away from building a business.

These needs also can delay a company's readiness to go public--which is the time when many venture firms expect a payoff for their investments. Venture firms would like portfolio companies to go public when they can get top value for their shares, and Dintersmith said Charles River's ability to remove the barriers that keep companies from getting to market quickly can make a tremendous difference.

"Ultimately, the value is large," Dintersmith said. "Instead of going to the market undervalued, they go public and are worth a ton."

What Charles River is doing isn't new. But it is part of a growing trend of venture firms to increase the services they provide to their portfolio companies.

Atlas Venture, a Boston-based venture firm, has considered expanding what it offers its companies, and will announce plans--perhaps including a unit similar to CRVelocity--later this year, according to Thomas P. Eddy, the company's chief operating officer.

Even venerable Bessemer Venture Partners in Wellesley is getting into the act.

It recently bought a controlling interest in an executive search firm, Lexington Partners. Renamed Bessemer Search Group LLC, the unit will operate out of Bessemer's Wellesley and Menlo Park, Calif., offices and work exclusively with Bessemer's portfolio companies.

And Rob Soni, Bessemer's managing partner, said his firm is looking to expand its offerings over time, although he declined to disclose what form that expansion will take.

Experts and venture capitalists attributed the rush to increase services to the flood of venture funding available, with funds closing in the billions of dollars, and the pressure that places on those firms.

"Money has become a commodity," Dintersmith said. "What is important is how we can help" beyond investing.

With cash so readily available, venture firms are competing against one another and find themselves forced to distinguish themselves with ancillary services, said Michael Sommer, a partner with PricewaterhouseCoopers LLP's Boston office.

Sommer said CRVelocity could give Charles River an edge in landing the hot start-up companies.

"There's lot of competition among VCs," Sommer said. "Why would you want to come to Charles River? They're trying this as a distinguishing factor."